Dean Foods Company (DF) is set to report its fourth quarter 2012 results on Feb 13. Last quarter it posted an approximate +17.9% surprise. Let’s see how things are shaping up for this announcement.

Growth Factors in the Past Quarter

Despite a decline of 7.8% in net sales, Dean Foods’ adjusted earnings for the last-reported quarter jumped 83% to 33 cents per share. The improvement was an outcome of disciplined expense control on all fronts throughout the organization. The company continues to make headway with its efforts to achieve the lowest cost position in the industry. We believe that the company has benefited from continued focus on cost reduction initiatives across its businesses. Further, as the U.S. economy is showing signs of stabilization, we believe that Dean Foods is well positioned to capitalize on the opportunity.

Earnings Whispers?

Our proven model does not conclusively show that Dean Foods is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 or #3 for this to happen. That is not the case here, owing to the following factors:

Zacks ESP: ESP for Dean Foods is 0.00%. This is because the Most Accurate Estimate stands at 30 cents, which is in line with the Zacks Consensus Estimate.

Zacks #3 Rank (Hold): Dean Foods’ Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Rank #3, when combined with a 0.00% ESP makes surprise prediction difficult. We caution against stocks with Zacks #4 and #5 Ranks (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Our proven model shows that Cousins Properties is likely to beat earnings since it has the appropriate combination of two key ingredients:

Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +20.00%. This indicates a likely positive earnings surprise.

Zacks Rank #3 (Hold): This increases the predictive power of its ESP. The combination of its Zacks Rank and Earnings ESP makes us confident of a positive earnings surprise in the to-be-reported quarter.

Stocks with Zacks Ranks of #1, #2 and #3 have significantly higher chances of beating the earnings estimates. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.

Key Drivers

Cousins Properties has a diversified portfolio of office, retail, urban residential and single-family communities that are mainly located in the high-growth Sun Belt region. This mitigates the operating risks associated with the economic down cycles involved in operating a single business segment. Benefiting from this, the company has been performing favorably and has delivered an average earnings surprise of 16.34% over the last four quarters.

Also, the company maintained focus on upgrading its overall portfolio with the acquisition of premium assets in the fourth quarter. Notable among these are the acquisition of Post Oak Central in the Galleria submarket of Houston and the purchase of residual 80% interest in Terminus 200 tower in the Buckhead submarket. We expect this to provide Cousins Properties with a relatively steady source of revenue and prove accretive to the fourth-quarter earnings.

Other Stocks to Consider

Here are some other REITs you may want to consider as our model shows they have the right combination of elements to post an earnings beat this season:

Ventas Inc. (VTR) has an Earnings ESP of +2.06% and carries a Zacks Rank #2 (Buy). The company is scheduled to report its earnings on Feb 15, before the opening bell.

Host Hotels & Resorts Inc. (HST) has an Earnings ESP of +5.41% and holds a Zacks Rank of 3. The company is scheduled to report its earnings on Feb 21, before the opening bell.

Vornado Realty Trust (VNO) has an Earnings ESP of +13.04% and carries a Zacks Rank of 3. The company is scheduled to report its earnings on Feb 26, after the closing bell.

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